No matter the scale or size of the business, there is a collective exasperation expressed during tax season. Let us face it, no one likes paying taxes! The situation becomes even more difficult because of the complicated nature of filing tax statuses and returns.
Business owners not only have to file taxes on their businesses but also maintain additional filings for their individual taxes. This creates a lot of confusion leading to the making of common mistakes. Sales tax is one area that has often been dreaded by businesses of all shapes and sizes.
In this article, we are going to look at some of the common tax mistakes businesses should avoid making during this tax season. Additionally, we are also going to make a case for sales tax outsourcing and discuss why businesses should explore this avenue seriously.
List of 5 Common Tax Mistakes Businesses should avoid making in 2021
Failure to Fill in Proper Tax Forms and Returns from time to time-
There is no uniformity when it comes to the different types of taxes businesses are required to pay and file. Some have to be filed quarterly, while others need to be done so on an annual basis. Payroll taxes and estimated taxes need quarterly filings while W-2 and 1099 forms need to be maintained right through the year. You need to remember the timelines and forms.
Under-reporting the Income of your Business to save taxes-
Businesses need to understand that the IRS and the State Tax department use sophisticated measures to arrive at exact calculations. With nearly all aspects being digitized, businesses should not make the mistake of under-reporting their incomes. This can invite a lot of fines, penalties as well as lead to cancellation of the business license, permits, and more.
Removal of distinction between Personal and Business Income + Taxes-
A lot of business owners fail to understand that the business is a separate legal and financial entity. The need of the hour is to ensure that your individual taxes are kept separate from your businesses’ financial accounts. Failure to maintain this distinction can land business owners and businesses in a lot of legal trouble. IRS is very strict about the mixing of funds.
Zero Attention to Document Maintenance and Papers-
Maintaining financial records in a properly documented format is critical for businesses. This shows responsibility and good financial conduct. If at any time the IRS requests you to present the papers you as a business should be ready to do so at a moment’s notice. Keeping and maintaining financial records for your business is essential to avoid getting into trouble.
Being Loose about Taking Deductions when not eligible-
The deduction is a word that is common in tax circles. However, there are specific guidelines around which businesses can and should take deductions. If you are too loose about filing for deductions by hiding facts or under-reporting incomes, you will face severe penalties from the IRS and other tax bodies. Ensure you are filing for deductions only when you are eligible.
Outsourcing Sales Tax: Major Benefits of the same
In this section, we are going to list down some of the major benefits that businesses can experience when outsourcing sales tax needs-
- This helps in an expert handling all aspects of a company’s tax requirements. As businesses can be understaffed, this can help them save on money and time.
- An expert ensures zero mistakes when it comes to filing important tax papers, and deductions. The chances of them going wrong are almost negligible.
- Outsourcing sales tax can help business owners concentrate on running their business in the best possible fashion. This can lead to business growth on a massive scale.
- There might be multiple avenues for getting deductions if you know how it should be done. However, only an expert will be able to help it get it done for your business.
The Bottom Line
While many experts believe that digitization has made processes around taxes simpler, others feel that this has only given rise to confusion. Nevertheless, working with an expert through outsourcing can help in ensuring that the business stays out of trouble at all points. If you have any other questions, that you need to know about filing tax returns, let us know in the comments below.